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    US Loses out on Chinese LNG Demand


Sanctions on US LNG make it too expensive, according to US government statistics.

by: William Powell

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US Loses out on Chinese LNG Demand

Chinese tariffs reduced the share of US LNG in the world's fastest-growing LNG market, according to data released July 29 by the US Energy Information Administration (EIA). China imported 20% (1.3bn³/day) more in the first five months of 2019 compared with the same period last year as import capacity grew and coal switching continued.

But LNG from the US accounted for 7% of that total. In September 2018, China imposed a 10% tariff on LNG from the US and in the months since then (October 2018 through May 2019), US LNG has accounted for 1% of China’s LNG imports.

Because no long-term contracts between suppliers of US LNG and Chinese buyers exist, LNG from the US is supplied to China on a spot basis. Spot LNG shipments are dispatched based on the prevailing global spot LNG and natural gas prices, and the tariff made LNG imports from the US to China less competitive, the EIA said.

US exports reached a new peak of 4.7bn ft³/day in May 2019, according to the latest data published by the US Department of Energy. The country is now the world’s third-largest LNG exporter, after Qatar and Australia, averaging 4.2bn ft³/d in the first five months of the year, beating Malaysia’s 3.6bn ft³/d during the same period. 

Shipments to Europe accounted for almost 40% of the total in the first five months of 2019 and surpassed exports to Asia for the first time in January 2019. They are expected to grow as new LNG supply comes online and European countries continue to increase natural gas consumption as part of their decarbonisation initiatives.

Total LNG imports in the three largest global LNG markets – Japan, China, and South Korea – started to decrease in February 2019 amid a milder-than-normal winter. In Japan, some nuclear plants restarted.

Recent declines in price differentials between European pricing benchmarks and Asian spot LNG prices have affected the flow of flexible LNG. The spread between Japan spot LNG and spot gas prices in northwest Europe was about $1.00/mn Btu in December 2018 and January 2019, and it reached a low of $0.60/mn Btu in April.

The first trains at the two new liquefaction facilities – Freeport LNG in Texas and Elba Island LNG in Georgia – will come online in the next few months, ensuring more US exports. The EIA forecasts an average 4.8bn ft³/d in 2019 and 6.9bn ft³/d in 2020 as new liquefaction trains at Cameron, Freeport, and Elba Island are commissioned in the next 18 months.